Gold Dealers and the Gold Rush of 09

by search.optimizativdf
"By no means are we out of the woods just yet," said the US President in his economic State of the Union address yesterday. The worst economic crisis since the Great Depression grew out of "a perfect storm of irresponsibility and poor decision-making and we cannot rebuild this economy on the same pile of sand."

Few would disagree with that statement. He went on to reiterate the need to fund banks in response to the general hue and cry, "where's our bailout?" President Obama is very smart and is surrounded by very smart individuals on his staff. Their decisions may be correct ones and his policies may well lead us out of the economic doldrums.

Nevertheless, Simon Johnson, former chief economist of the IMF and currently Sr. Fellow, Peterson Institute For International Economics, had some interesting points to make last week on the Nightly Business Report, "I think we may be bottoming out. I actually don't think the decline is going to be a great depression proportions. But I think we're going to go down and stay down and I think we're talking about an L shape . . . if we don't deal with the banking system, if we don't prevent further collapses, that could be quite serious in this country. And I do worry about the situation outside the United States. And I think in Europe in particular there are some really serious vulnerabilities, but they're only just now beginning to address and everything that happens over there, finance and the real economy affects us and it bounces back and forth between the two places . . . if we really can't handle the political power of our financial sector which I think has become incredibly dangerous. They have to take some losses, people who run those banks and people who invest in those banks. If we can't figure out how to have them take those losses, it's going to come back to the taxpayer. A lot of times these sorts of problems come through as runaway inflation for example. So you either get the great depression or you get runaway inflation or some combination of those."

This is also a very smart man speaking and when people in the know speak of the Great Depression, even as a worse case scenario, or runaway inflation, we naturally begin thinking about gold. They are panning for gold again in Northern California. Prospectors have been doing that for years, but it would appear the "gold rush" is on again, ads including offers to buy gold are continuing to run and Precious metals gained last week on the day following three down days in succession from profit taking.

It should also be noted that precious metal funds did very well in the first quarter with gold leading the way. Many of these are comprised of gold mining stocks, however, Toqueville Gold, which also owns actual gold bullion, Chrisine Benz of Morninstar mentioned in an interview on the Nightly Business Report, was up to the tune of 19% during the first quarter. " . . .gold funds took three of the top five spots for the quarter," said Paul Kangas.

Currently gold is in a trading pattern , which typifies a seasonal tendency. It is showing strong support, however. There probably will be no steep moves this spring and early summer. Again, that is usually the case. Nonetheless, we remain bullish on gold long term.

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